Right Thinking from the Left Coast

Tag: Living wage

Seattle is about to raise its minimum wage to a staggering $15 per hour. The deal is being touted as a cooperation between labor and business. However, that deal was basically extorted by the local government:

With his Income Inequality Committee failing to reach a decision at its final scheduled meeting April 23, and business and labor representatives still at odds over core issues on a deal for a $15 minimum wage, Seattle Mayor Ed Murray gathered the business members of the committee the following day.

Unless they reached an agreement with labor, he told them, he would announce a plan worse for them — and more closely resembling Socialist City Councilmember Kshama Sawant’s pro-worker initiative.

But Murray didn’t announce his own proposal April 24. He stood before a room packed with local and national media and said while there was broad agreement, there were unresolved issues.

One week later, Murray returned to the same conference room in City Hall to announce a historic agreement between business and labor to raise the city’s minimum wage to $15 an hour over five to seven years.

The negotiated deal calls for a three- to seven-year phase-in, with large businesses — those with at least 500 workers — required to reach the $15 wage first.

As you can imagine, the usual suspects are crowing, claiming this will inject half a billion dollars into the local economy (since we all know that wages can be raised with money grown on trees). I find this claim to be ridiculous. All the minimum wage will do — as the minimum wage proponents themselves so often note — is redistribute income. It will not create income on its lonesome.

But even that comes with a price. With this wage hike, Seattle will have a higher minimum wage than any country in the world.

Any plan that makes hiring a worker more expensive than in France should be cause for concern. We know that businesses in high-wage countries are especially eager to replace workers with software. Fast-food restaurants in Europe, for instance, have been some of the earliest adopters of labor saving technologies like digital kiosks where customers can order. Those innovations are already beginning to make headway in the United States. But by passing a $15 minimum, Seattle would risk speeding the process up within its city limits.

Liberal rag the New Republic, while supporting the minimum wage hike, is honest enough to note at least three negative consequences: employers will hire fewer workers; employers will replace employees with computers and employees will be priced outside of the city.

It is entirely possible that as Seattle’s new minimum wage proposal takes effect, the poverty rate within the city limits will decrease. What remains to be seen, however, is if the new proposal decreases the poverty rate by raising the market incomes of low-wage workers currently residing in Seattle or if it instead prices some number of less-skilled women and men out of Seattle’s housing market by reducing their market incomes, either by forcing them to exit the city’s formal labor market to seek lower-wage employment in neighboring jurisdictions or by encouraging local employers to reduce work hours.

A question for the class: what businesses pay the minimum wage? The discount and low-price businesses that the working poor and middle class utilize most often, such as fast food restaurants. So what’s going to happen when the minimum wage is raised? The cost of living for Seattle’s lower classes will go up massively. It won’t go up for Seattle’s upper class since their preferred stores are expensive anyway and pay high wages.

The result will be, as Reihan has documented, poor people moving to areas that have lower minimum wages so that they can afford to live, then commuting long ways to areas of higher minimum wage. I don’t see that having to maintain a car and commute a couple of hours every day improves their lifestyle.

However, while this is an even trade of money from one group to another, one specific source of money actually shrinks.

The lost money is federal government benefits that low wage workers lose thanks to the increase in the minimum wage. In fact, many of these workers will lose food stamps, some or all of their earned income tax credit, and other means-tested federal benefits. This money is currently spent in the local economy, but after the minimum wage is increased the money will revert to Washington, D.C., to be spent on something else.

As I showed in an earlier column, low wage workers can lose as much as half of any new income to increased taxes and lost benefits. Given the percentage of low wage workers that live in low income households (around 30 percent) and that eligibility for the earned income tax credit extends to about $50,000 for a family of four, the loss to the Seattle area economy is likely on the order of $75-100 million.

We’ve talked about this before: how the federal tax and welfare systems have created massive effective marginal tax rates for those attempting to climb out of poverty. So the notion that this is a straight-up cash dump into the wallets of poor people is incredibly misinformed. At least half and probably more of that money will swirl right out of the bottom of their wallets in the form of reduced government subsidies. And the rest will vanish with increased prices and long commutes. Reducing people’s dependence on government is a good thing, of course. But let’s not pretend they’ll have more money.

Some people are saying that this will be an interesting economic experiment to test the effect of raising the minimum wage. I’m dubious of that. First, people are not economic lab rats and shouldn’t be treated as such. Second, I am sure that the books will be cooked on this experiment. When poor people flee Seattle to live in places they can actually afford, this will give the appearance of a more prosperous city. It’s the same logic by which a city reduces its poverty rate by using imminent domain is used to force poor people to sell their homes to rich people.

Oh, well, could be worse. Down in California, some fools want to raise the minimum wage to $26 an hour.

Fresh off their recent report on Obamacare that predicted a decline in the workforce of 2.5 million (partially as a result of employer cutbacks, mostly as a result of people leaving jobs due to high effective marginal rates), the CBO today issued a report on the effect of raising the minimum wage.

Raising the U.S. minimum wage would lead to the loss of about half a million jobs by late 2016 but lift almost a million Americans out of poverty, the Congressional Budget Office forecast in a report on Tuesday that reignited debate over one of President Barack Obama’s top priorities this year.

Buoyed by polls showing three-quarters of Americans in favor of a minimum wage hike, Obama and his fellow Democrats advocate raising the minimum hourly wage to $10.10 from the current $7.25 in a move to boost the stagnant wages of millions of low-income workers.

In the long term, Democrats also want to tie future minimum wage increases to inflation, avoiding the legislative fights over wages for lower-paying jobs.

The political flacks at the White House and AFL-CIO are disputing this, claiming they know more about economics than the CBO does. In fact, much of the Left Wing has declared the debate on minimum wage and employment to be over. Last week, Bill Maher said the idea that raising the minimum wage cost jobs was completely discredited. This isn’t, of course, reflective of the view of any, you know, economists. The most they will argue — as Krugman has — is that the effect is small. But no honest economist will argue that the law of supply and demand is magically suspended when it comes to low-wage jobs.

In fact, the connection between the minimum wage and unemployment is so natural that one of the honest liberals, Matt Yglesias, had this to say:

If the White House genuinely believes that a hike to $10.10 would have zero negative impact on job creation, then the White House is probably proposing too low a number. The outcome that the CBO is forecasting—an outcome where you get a small amount of disemployment that’s vastly outweighed by the increase in income among low-wage families writ large—is the outcome that you want. If $10.10 an hour would raise incomes and cost zero jobs, then why not go up to $11 and raise incomes even more at the cost of a little bit of disemployment?

Yglesias is uncorking the argument many conservative have: if raising the minimum wage has “little to no impact” on unemployment, why not raise it to $20 or $50 an hour? If you can’t countenance such hikes, then you are implicitly admitting that raising the minimum wage costs jobs.

Anyone who is honest about the issue will admit that there’s a tradeoff: how many fewer workers are you willing to put up with for an increase in the wages of those still employed? I would argue, given the present labor market, that the number is zero; that we should, at minimum, hold off until the labor markets recover (if that ever happens). Of course, in a recovered labor market, wages will go up anyway because employees will be scarcer than jobs.

Supporters of the minimum wage like to point out that the low minimum wage means we are subsidizing jobs at places like Walmart, where some employees qualify for food stamps. This is circular logic, of course. Food stamps, Medicaid, EITC — these were expanded specifically to give access to the working poor. You can’t then turn around and complain that that more people are taking advantage of them when that was the entire point.

But setting that aside: isn’t having subsidized jobs for four million people better than having unsubsidized jobs for two million? Someone who has job — even it’s a bad one — has an opportunity to prove themselves, to advance, to aspire. But someone who doesn’t have a job has no opportunities and no hope.

We’ve seen this kind of snobbery before and we’ve seen it hurt poor people before. Building codes are designed to outlaw cheap apartments — and then we wonder why poor people can’t find anywhere to live. Health insurance regulations are designed to outlaw cheap insurance — and then we wonder why millions aren’t insured. And now we want to outlaw low-paying jobs. And then we’ll wonder why low-skill workers can’t find employment.

It’s easy for someone who already has a job to say that no one should have to take a job at Walmart for $7.25 an hour. It’s a lot harder to say that when you have no prospects and you’re falling further and further behind the rest of the country. For many people, that “bad” job can be a lifeline.

I sometimes think that Stephen Bainbridge is right when he says we are headed toward a society like Jerry Pournelle’s CoDominium where we have one group of citizens totally dependent on government and another who work. Only in our CoDominium, the welfare recipients get to vote.

We need to make sure everybody has skin in the game, not just the top few percent. Everybody ought to vote and everybody ought to pay taxes.

And everyone ought to work, too. Even it’s just part-time and pays a shit wage, no able-bodied adult should go through a week without putting at least a few hours into the grindstone (preferably around 40, but at least more than 0).

I’m somewhat supportive of programs that help the working poor — that give them the means to bring themselves up out of poverty. The minimum wage is not that. It benefits some working poor while putting other completely out of work at a time when jobs are very very hard to come by.

Making progress easier for low-wage workers is one thing — we’ve talked about the guaranteed income and negative income tax proposals circulating around. But throwing 500,000 more people into the jobless hopeless class is just a recipe for disaster.

Switzerland will hold a vote on whether to introduce a basic income for all adults, in a further sign of growing public activism over pay inequality since the financial crisis.

A grassroots committee is calling for all adults in Switzerland to receive an unconditional income of 2,500 Swiss francs ($2,800) per month from the state, with the aim of providing a financial safety net for the population.

Organizers submitted more than the 100,000 signatures needed to call a referendum on Friday and tipped a truckload of 8 million five-rappen coins outside the parliament building in Berne, one for each person living in Switzerland.

For married couples, you’re talking about $67,000 a year for blessing the planet with your presence. I know couples with two PhD’s who don’t make that much. Switzerland is a wealthy and expensive country — the per capita income is nearly $80,000. But this is ridiculous. In addition, Switzerland enacted “say on pay” limits to executive compensation and have an upcoming referendum to limit executive salaries to 12 times the lowest paid staff member. They may not be going quite full communist, but they’re close.

If these pass and you open a business in Switzerland, you will have to pay every employee no less than $34,000 a year and you yourself will not be able to take home more than $400,000 per year. I’ve always liked Switzerland, but I can see this driving away a lot of businesses.

Last week, the Council approved a measure that would require Walmart and other large retailers doing business in the District to pay a “living wage” of $12.50 per hour.

But… uh oh. Hypocrisy alert.

District government pays less than $12.50 per hour.

According to the D.C. Department of Human Resources, some full-time school maintenance workers and custodians make $11.75 per hour. The rate for a clerk at the University of the District of Columbia is $10.40.

Council members went to great lengths to criticize Walmart’s pay scale. They should have taken care of their own business first.

The Council’s thinking is flawed on other accounts, too. Their law targets Walmart while exempting other businesses from paying higher salaries.

Here is a better idea: Raise the current minimum wage in D.C. — $8.25 per hour — for every worker. Scale it up incrementally over time.

As if this wasn’t blatantly obvious that what the D.C. autocrats did was specifically targeted at fucking over Walmart, and entity the left abhors, because its business model flies in the face of all the faerie tales about labor, wealth redistribution, empowering the poor through government handouts, and centralized administrative economics, and had nothing to do with helping anyone. But it bears repeating to point out that whenever you see leftists grandstanding about some bullshit, it is very likely they are the worst enablers or agents of whatever they are so pissed of at.

D.C. lawmakers gave final approval Wednesday to a bill requiring some large retailers to pay their employees a 50 percent premium over the city’s minimum wage, a day after Wal-Mart warned that the law would jeopardize its plans in the city.

“The question here is a living wage; it’s not whether Wal-Mart comes or stays,” said council member Vincent B. Orange (D-At Large), a lead backer of the legislation, who added that the city did not need to kowtow to threats. “We’re at a point where we don’t need retailers. Retailers need us.”

Let me point out that there is no idea or concept more destructive and devastating to employment than the idiotic “living wage” one. Oh, it may sound noble and imply that the people pushing it care, but the reality is that the concept has about as much of a chance to exist in reality as a unicorn does. WTF is a living wage? It’s the whole idiotic marxist concept that labor is what really is valuable, and not the end product or the demand for and ability to afford said product. This nonsensical approach to commerce is why marxists feel paying a doctor and a turd polisher the same amount makes for some kind of right and justice.

I will again state the blatant hypothetical situation. A turd, even when some idiot has spent 50 hours laboring to polish it, remains a turd. Nobody will pay any kind of money, let alone big money, for it. Marxism believes that because some fucking retard spent hours polishing the thing, it now suddenly has value. Not only that, but that someone wants to buy the stupid thing at the price they have to sell it, to pay the turd polisher for his labor.

The left hates fucking Walmart, because there is no company on this planet that does more to discredit all the marxist and Keynesian bullshit they claim to believe in and peddle. But Walmart has made it possible for average people to live way beyond their means and income, by providing cheap services and products, and the left despises them for that. We can debate quality, as this seems to be the main complaint the progressive Walmart hating crowd bandies about when trying to make the case that the problem is stores like Wal-Mart and not their idiotic beliefs and lack of understanding of commerce and economics, but a poor shlob that is given the option of owning something of lesser quality, over never being able to afford it, will likely tell you they would pick the first option 9,999 times out of ten thousand. It’s not like anyone is putting a gun to their head and making them buy Walmart shit either.

Nobody is owed a living wage. No-fucking-body. The concept is ludicrous. You get paid what your employer is willing to, because the market bears that cost, and the product or service you provide is worth it at that price. We pay doctors, and other that perform other highly specialized and in-demand work, lots of money, because very few people have the ability, dedication, and wherewithal to complete the specialized training needed to do the job, and then, to do the job right. There is always going to be a hard limit on these skilled people while the product or service they deliver is in demand and complex. That’s also why we pay the people that do what amounts to meaning less labor – in the sense that any Joe blow off the street can do the same task with minimal preparation – far less than a doctor. Working at Walmart, or any such type of menial service job, is not rocket science. Besides, nobody forces you to apply at Walmart now, do they? It’s your choice to work there or not. And yet, we are constantly regaled with stories of thousands of employees applying for jobs at any opening Walmart that has a couple of hundred jobs.

Look. I am glad the idiots in D.C. are cutting off their nose to spite their face. Nothing makes me happier than watching morons that elect leftist fucks to run their fiefdom. getting shafted by the left’s stupid ideas, always criminal behavior, and stupidity. It’s cathartic. There is a reason that the biggest wastelands in the US are, bar none, places that have been run and owned by the leftists for decades. Chicago, Detroit, Washington D.C.: that’s what the rest of the country would look like if the left gets a permanent hold on, and expands, its power. I think that after 8 years of Obamanomics that list of shitholes will be large and distinguished as well. Progressives can keep pretending they do the incredibly stupid shit they do out of altruistic and noble intent, but reality will make sure all of us know what they are doing is not just stupid, but destructive.

Enjoy the royal shafting you just got people in D.C.! You deserve it for electing these morons. When you have to pay more for your basic necessities, have fewer jobs to work a, and find yourself with more economic woes, I am sure most of these idiots will blame Walmart for not opening stores there instead of the politicians that drove them away, but that’s all good. Stupid people should have to suffer the consequences of their mistakes and idiocy. That’s how life teaches you lessons.